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1.What is the relationship between Management and cost Accounting?

Accounting and Management are very closely related. Because management depends entirely on
accounting for information in financial affairs to make decisions. Accounting provides all kinds of
financial information in project planning and implementation of a business concern.

The aim of the third edition of this book is to explain the principles involved in designing and evaluating
management and cost accounting information systems. Management accounting systems accumulate,
classify, summarize and report information that will assist managers in their decision-making, planning
and control activities. A cost accounting system traces costs to jobs or products for financial accounting
requirements in order to allocate costs incurred during a period between cost of goods sold and
inventories. Management accounting collects data from cost accounting and financial accounting.
Thereafter, it analyzes and interprets the data to prepare reports and provide necessary information to
the management.

On the other hand, cost books are prepared in cost accounting system from data as received from
financial accounting at the end of each accounting period. However some relationship between these
Two types of account are discuss and analyze below:

The Cost Accounting and Management Accounting.

1 The main objective of cost accounting is to assist the management in cost control and decision-
making.The primary objective of management accounting is to provide necessary information to the
management in the process of its planning, controlling, and performance evaluation, and decision-
making.
2 Cost accounting system uses quantitative cost data that can be measured in monitory terms.
Management accounting uses both quantitative and qualitative data. It also uses those data that
cannot be measured in terms of money.

3 Determination of cost and cost control are the primary roles of cost accounting. Efficient and
effective performance of a concern is the primary role of management accounting.

4 Success of cost accounting does not depend upon management accounting system. Success
of management accounting depends on sound financial accounting system and cost accounting systems
of a concern.

5 Cost-related data as obtained from financial accounting is the base of cost accounting.
Management accounting is based on the data as received from financial accounting and cost
accounting.

6 Provides future cost-related decisions based on the historical cost information. Provides
historical and predictive information for future decision-making.

7 Cost accounting reports are useful to the management as well as the shareholders and creditors
of a concern. Management accounting prepares reports exclusively meant for the management.

8 Only cost accounting principles are used in it. Principals of cost accounting and financial
accounting are used in management accounting.

9 Statutory audit of cost accounting reports are necessary in some cases, especially big business
houses. No statutory requirement of audit for reports.

10 Cost accounting is restricted to cost-related data. Management accounting uses financial

accounting data as well as cost accounting data.